Delivering 1.5m new homes and investing in public infrastructure - Housing, Communities and Local Government Committee launches new inquiry on land value capture

The Housing, Communities and Local Government (HCLG) Committee has launched an inquiry to look at how land value capture policies - which seek to capture the value uplift on land when it is granted planning permission - can contribute to the delivery of the Government's house building plans and help fund affordable housing and public infrastructure (see website news item).

The Committee's inquiry will consider possible reforms to the current system of developer contributions towards affordable housing and infrastructure. It will also examine the Government's plans to reform compulsory purchase compensation rules, and how increases in land value may be captured more effectively for public good.

The cross-party Committee will explore how land value capture (LVC) mechanisms could be optimised to operate with the Government's planning reform agenda, including the delivery of New Towns and the release of ‘grey belt' land for development.

Launching the inquiry, Florence Eshalomi MP, Chair of the Housing, Communities and Local Government (HCLG) Committee said: “If the Government can get its land value capture policies right, they could make a valuable contribution to funding affordable housing and investing in public infrastructure, such as GP surgeries, and schools. Reform of land value capture could also be a useful tool in supporting the delivery of the Government's New Towns programme.

“We are in the middle of the housing crisis and the cost of land is one of the main reasons that house prices are rising so rapidly. Currently, landowners can make significant profits from the substantial increases in land value when local authorities grant planning permission. We need a land value capture system which is fair and that helps to deliver what communities need – affordable housing and public services which people can rely on.

“I hope the Committee's inquiry will bring forward practical recommendations to reform land value capture and help the Government achieve its target of delivering 1.5 million new homes by the end of this Parliament.”

Land value capture is a method of capturing increases in land value for the public good. These increases can be due to public policy decisions, such as the granting of planning permission, or nearby development events, such as major infrastructure projects. The government uses taxes and charges to capture these increases.

The Committee's inquiry will explore whether alternative mechanisms for capturing the uplift in land values in England may be more suitable and how value could be realised across regions in England which have lower average land values. The Committee will also examine the effectiveness of existing land value capture methods, such as the Community Infrastructure Levy (CIL) and planning obligations under Section 106 of the Town and Country Planning Act 1990. The Committee are also likely to explore reform of compulsory purchase orders.

The inquiry's full terms of reference are included below.

Public evidence sessions are expected to commence in March 2025.

Witness details will be confirmed and announced in due course, but the Committee are likely to hear from witnesses including housing and planning groups, planning lawyers, think-tank representatives, local government elected representatives, and Matthew Pennycook MP, Minister of State for Housing and Planning.

Terms of reference – Delivering 1.5m new homes: Land Value Capture

The Committee welcomes written evidence on the terms of reference outlined below.

The closing date for submissions is Wednesday 5 March.

• How effective and efficient are current mechanisms of land value capture in England?
• What alternative methods of land value capture might be most suitable for England?

o   Would alternative mechanisms of land value capture deliver more affordable housing and public infrastructure than the current section 106/Community Infrastructure Levy regime?

o   How could the benefits of alternative mechanisms of land value capture be realised across England, including regions with lower average land values?

• What are the economic and practical opportunities and challenges of pursuing land value capture policies in England?
• What mechanisms of land value capture have been effective internationally?
• Should reforms to land value capture be pursued through changes to the current section 106/Community Infrastructure Levy regime, or by introducing a new mechanism?

o   What changes to planning law and guidance would be needed to introduce a new mechanism of land value capture?

o   Would new methods of land value capture be compatible with human rights legislation, regarding property rights?

• How could different mechanisms of land value capture complement the Government's ongoing planning reform agenda, including delivery of New Towns and the release of ‘grey belt' land for development?
• Overall, would reforming land value capture support or distract from the Government's target of delivering 1.5 million new homes by the end of this Parliament?

ENDS

Further information

What is the current system of LVC in England? Currently, the primary mechanisms to capture land value uplifts in England are developer contributions, in the form of planning obligations (known as “section 106 agreements”), and the Community Infrastructure Levy.

• Section 106 agreements are legal agreements between developers and local planning authorities which set out the public benefits which the developer will deliver (such as a proportion of affordable housing, and/or public infrastructure) to make the development acceptable in planning terms, as a condition of planning permission;
• Community Infrastructure Levy (CIL) is a locally-determined, fixed-rate development charge, payable in £ per sq. metre, to help finance the infrastructure (not affordable housing) needed to support the development of the affected area.

The Housing, Communities and Local Government Committee scrutinises the spending, policies and administration of the government department for Housing, Communities and Local Government. It is not a government committee but a select committee of the House of Commons with a key role in holding ministers to account. Any of our inquiries would correctly be described as a ‘parliamentary inquiry' and not a ‘government inquiry'.